Tax Insights: 2019 Ontario fall economic statement ─ Tax highlights
November 07, 2019
Issue 2019-37
In brief
On November 6, 2019, Ontario’s Minister of Finance, Rod Phillips, presented the 2019 Ontario Economic Outlook and Fiscal Review (economic statement). The economic statement:
- reduces the province’s small business tax rate from 3.5% to 3.2%, effective January 1, 2020
- increases personal taxes on non-eligible dividends, starting 2020
This Tax Insights discusses these and other tax initiatives proposed in the economic statement.
In detail
Business tax measures
Corporate income tax rates
The economic statement proposes to reduce Ontario’s small business tax rate (on the first $500,000 of active business income) from 3.5% to 3.2%, effective January 1, 2020.
Combined federal/Ontario corporate tax rates are shown in the table below.
Federal and Ontario corporate rates |
Ontario |
Federal + Ontario |
||||
|---|---|---|---|---|---|---|
|
2018 - 2019 |
2020 |
2018 |
2019 |
2020 |
|
General income |
11.5% |
26.5% |
||||
M&P income |
10% |
25% |
||||
Canadian-controlled private corporations (CCPCs) |
active business income to $500,000 |
3.5% |
3.2% (1) |
13.5% |
12.5% (2) |
12.2% (1) |
investment income |
11.5% |
50.17% |
||||
1. The rate reflects the proposed decrease in Ontario’s small business tax rate from 3.5% to 3.2% on January 1, 2020.
2. The combined rate reflects the decline in the federal small business tax rate from 10% to 9% on January 1, 2019.
Personal tax measures
Personal taxes on non-eligible dividends
Due to the proposed reduction in Ontario’s small business tax rate (see above), the economic statement proposes to decrease the province’s non-eligible dividend tax credit rate from 3.2863% to 2.9863%, effective January 1, 2020. This effectively increases personal taxes on non-eligible dividends after 2019 by 0.345%.
Personal income tax rates
The table below shows the top two combined federal/Ontario personal income tax rates, and reflects the proposed change to Ontario’s non-eligible dividend tax rates (as discussed above).
Combined federal/Ontario rates |
Taxable income |
Ordinary income |
Capital gains |
Canadian dividends |
||
|---|---|---|---|---|---|---|
Eligible |
Non-eligible1 |
|||||
2020 |
Top bracket |
> $220,000 |
|
|
|
47.74% |
2019 |
47.40% |
|||||
2018 |
46.65% |
|||||
2020 |
2nd from top bracket |
$210,3712 to $220,000 |
|
|
|
45.95% |
2019 |
45.60% |
|||||
2018 |
$205,842 to $220,000 |
44.84% |
||||
1. The combined non-eligible dividend tax rates reflect the decline in the federal non-eligible dividend tax credit rate for 2018 and 2019 (which resulted from a decrease to the federal small business tax rate, as noted above).
2. The $210,371 threshold will be indexed for 2020.
Other measures
Aviation fuel tax for northern Ontario
The economic statement proposes to decrease the aviation fuel tax rate for northern Ontario (the North) from 6.7¢ per litre to 2.7¢ per litre, effective January 1, 2020. The North would be defined as the districts of Algoma, Cochrane, Kenora, Manitoulin, Nipissing, Parry Sound, Rainy River, Sudbury, Thunder Bay and Timiskaming.
Aligning interest on refunds
To simplify administration, the economic statement proposes to amend the Gasoline Tax Act to make the timeline for calculating interest on refunds under this act, consistent with that under the Fuel Tax Act. Interest would be payable from the date of the refund application to the date the government makes the refund payment.
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